Payment failure will block hazmat transportation
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October 02, 2013
Payment failure will block hazmat transportation

One of the more stringent provisions regarding hazmat transportation in the 2012 Moving Ahead for Progress in the 21st Century Act (MAP-21) is Section 33010, which instructs the Department of Transportation (DOT) to issue rules that prohibit entities that fail to pay fines for serious violations from engaging in activities regulated by the hazardous materials regulations (HMRs). 

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The Pipeline and Hazardous Materials Safety Administration (PHMSA) is now proposing a rule to implement that section for DOT agencies.  In addition to PHMSA, the proposed rule would increase the HMR enforcement authority held by the Federal Aviation Administration, Federal Motor Carrier Safety Administration, and Federal Railroad Administration.  Although the U.S. Coast Guard also enforces the HMRs, PHMSA’s proposal does not apply to the Coast Guard, which is part of the Department of Homeland Security.

Violation/penalty notices

Under existing regulations, the DOT agencies serve notices of probable violation that include the proposed civil penalty, payment information, and a statement of the respondent’s right to request a hearing.  Once the matter is fully adjudicated, the agency issues a final order that outlines the terms and outcome of the enforcement action, including the final penalty amount due, and describes any payment arrangements made between the agency and the respondent. 

The proposed rule would affect only those respondents who violate the payment terms of an order or payment plan.  Specifically, the prohibition caused by nonpayment would take effect beginning on the 91st day after the due date specified in the order or payment plan.

Bankruptcy

Section 33010 also provides an exemption from the HMR-transport prohibition for debtors in Chapter 11 bankruptcy.  However, under the rule, the exemption does not automatically activate once an entity files for bankruptcy.  PHMSA notes that the federal bankruptcy code does not allow the filing of a petition to function as a stay of the policing and regulatory powers of government agencies. 

Under the proposal, debtors under Chapter 11 would be required to provide the enforcing agency with specific information about the bankruptcy proceeding.  The agency must then seek a determination from the bankruptcy court on a debtor’s ability to pay a civil penalty claim.  In other words, if the court informs the regulatory agencies that the Chapter 11 entity is able to pay the penalty, the Chapter 11 exemption will not be available for HMR penalty payments.

Cessation orders

Also under the proposal, the enforcing agency will send the respondent a cessation of operations order (COO) if payment has not been received within 45 calendar days after the payment due date or payment plan installment date as specified in the final order.  A respondent may appeal a COO within 20 days of receipt of the COO; however, the right to appeal a COO is not an opportunity to re-argue the merits of the penalty assessment.  According to PHMSA:

“[Regulated entities] will have had ample opportunity to address these concerns at earlier stages in the enforcement process. The only information sufficient to prevent the prohibition on hazardous material operations after nonpayment of penalties would be proof of payment, proof of bankruptcy debtor status and an inability to pay, or an Emergency Stay issued by a Federal Circuit Court with jurisdiction over these matters.  Additionally, at the discretion of the agency, upon appeal by the Respondent, the agency can rescind the COO if an agreeable payment plan has been arranged.”

The proposed prohibition does not apply to tickets authorized under 49 CFR 107.310; tickets are issued by enforcing agencies for HMR violations that do not “substantially impact safety.”

The proposal was published in the September 24, 2013, FR.

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